Good in parts: clarity on severance

Almost always an adjudicator is asked to decide a dispute that has several topics. The canny opponent will dig and delve for any topics that have not yet become a dispute – a “gotcha device”. That happened in the Scottish case of Dickie & Moore Ltd vs McLeish. If a topic or two in among the frogs are mere tadpoles then some judges say that the whole adjudication goes down the plughole. Other judges are willing to weed out the good bits – it’s called severance – and then enforce those good bits. Useful, therefore, that this Scottish case is at appeal court level (the Inner House of the Court of Session) and becomes very persuasive on the topic of severance. Persuasive in England as well.

The construction works were for a new large house on a site near Armadale, midway between Glasgow and Edinburgh, price £2m. Contractor Dickie & Moore put in its final account: it was run of the mill. So were the disagreements about values of variations, extensions of time, loss and expense, defects and liquidated damages. The case came to adjudication. The well-respected adjudicator decided that the contractor was owed over half a million pounds. The customer/employer under the JCT contract sought to resist enforcement on four grounds, on which a judge subsequently ruled in the court of first instance (the Outer House) as follows:

(1) The claim was pursued under the wrong name – the judge rejected that on the grounds everyone knew who was intended to be sued, despite the name error.

(2) The adjudicator did not carry out all he was meant to carry out – the judge rejected that on the facts.

(3) The adjudicator used his pupil Q.S to assist his decision-making, which is a breach of fair play and natural justice – the judge rejected that, given he was a pupil and expected to help.

(4) Some of the heads of claim for time and loss and expense only matured on giving the notice of intention to adjudicate, so were not true disputes prior to commencing the adjudication – the judge said the adjudication was flawed as to those parts because the adjudicator tackled topics that were not yet disputes.

The three-man appeal court in Edinburgh seized the opportunity to get to grips with the differences of opinion on the question of whether severance can be operated so as to winkle out and enforce the good parts. Was a weeding-out good law? English judge Mr Justice Ramsey took the view that severance was not the preferred practice approach. For him the whole result in adjudication would thereby fall. His view was that adjudication was a quick-fire approach to yield a temporary decision and not to be hamstrung by scrabbling around on satellite litigation in the High Court to weed out good bits from bad. It was the opposite view to that of Scottish judge Lord Macfadyen. He could see the value on sorting good from bad. No, no, said other judges, it is not the courts’ job to dismantle and reconstruct the adjudicator’s decision; it intruded on the adjudicator’s role. A judicial “tish tosh” by other judges fathomed that a pragmatic approach to severance was appropriate. Here was an opportunity for the three-judge appeal court to lay down the law, so to speak.

The test, says the court, is whether there is a “core nucleus” of the adjudicator’s decision that is untainted by a part of the decision for which there was no jurisdiction. If so, the award survived. Let me give you an example. Say the task put to the adjudicator was to decide whether a list of alleged variations was, or was not, payable. The adjudicator gets on with it and decides liability and value. Ah, wait. The value task is outwith his jurisdiction; he has gone too far. Probably the lever-arch files included debates about value, but scope is determined by the notice of adjudication and the referral. Now, do we strike down the whole decision, or sever? In my example, the court can easily detect the core nucleus: it was to only decide liability. Severance is permitted.

The crucial point in severance is whether a decision was made that was reliant upon another topic for which there was no jurisdiction or authority to decide

In the Dickie & Moore case here, there was no jurisdiction to decide the extension of time. But the adjudicator did so because it was, wrongfully, in the referral (wrongful for technical reasons). So the court could throw out that decision from the award and enforce the rest. The crucial point in severance is whether a decision was made that was reliant upon another topic for which there was no jurisdiction or authority to decide. If an adjudicator decides the amount of loss and expense arising out of their decision about an extension of time, but had no authority to decide the extension of time, then the loss and expense is unenforceable – but the rest of the award will probably survive.

The Scottish appeal court went through a significant number of English as well as Scottish cases over the years. Mostly, the decision whether to sever depended on the particular circumstances of each case, and whether the award could stand up and be enforced once a severance part was ousted. Jurisdiction challenges are commonplace, many and varied. They include issues as to whether a topic has crystallised into a dispute, whether two disputes have been referred to adjudication, whether the adjudicator has been properly appointed, whether there is an effective adjudication provision, whether there is a contract at all between the parties, whether the subject matter is exempt from adjudication, and numerous others. All territory for professional dispute folk.

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple